2014 RHODES FOOD GROUP Annual Results Presentation 2014 ANNUAL - PDF document

ANNUAL RESULTS 2014

RHODES FOOD GROUP Annual Results Presentation 2014 ANNUAL RESULTS for the year ended 28 September 2014 PRESENTATION OUTLINE Section Presenter Introduction Bruce Henderson Strategic review Bruce Henderson Financial performance Tiaan Schoombie Trading performance Bruce Henderson Outlook Bruce Henderson Questions 2 1 1

RHODES FOOD GROUP Annual Results Presentation 2014 RHODES FOOD GROUP Annual Results Presentation 2014 INTRODUCTION TRADING ENVIRONMENT  Continued constrained consumer spending environment  Middle and lower income customers under pressure  Higher LSM customers more resilient  Most export markets have remained strong  Rand depreciated 13% against trading basket currencies  Cost inflation is in line with food inflation, recovered through efficiencies and price adjustments 4 2

REVIEW OF THE YEAR  Strong trading and financial performance  Sustained organic growth regionally and internationally  Benefit of Bull Brand acquisition and currency depreciation  Successful listing on the JSE on 2 October 2014  Raised primary capital of R600m  Listing to accelerate the group’s growth strategy 5 STRATEGIC REVIEW 3

RHODES FOOD GROUP Annual Results Presentation 2014 SUSTAINED ORGANIC AND ACQUISITIVE GROWTH Listed on JSE on 2 October Company established as a deciduous fruit Acquisition of Bull Brand, business entry into canned meat Acquisition of Giants Canning, entry into Acquired by shareholders of canned vegetables Swaziland Fruit Canners and renamed Rhodes Food Group Management buyout (led by Capitalworks) to fuel Acquisition of Magpie, entry into pies future business growth  Construction of a new ready meals plant (Gauteng)  Acquisition of Del Monte SA Acquisition of Sunpie . . . 1896 1999 2004 2006 2007 2010 2012 2013 2014 BUSINESS SEGMENTS Business segments Regional International Long Life Foods Fresh Foods Main products Canned fruits and Ready meals, pies and Canned fruits and fruit vegetables, jams, pastries, dairy products juice purees and canned meat concentrates Turnover 33% (2013: 25%) 32% (2013: 38%) 35% (2013: 37%) contribution Markets South Africa and South Africa Major global markets Sub-Saharan Africa Market positioning Strong product Long-term partnership Long-term supplier to portfolio, both branded with Woolworths global retail and and private label premium branded Supply agreement with customers Corner Bakery Extensive distribution of Magpie brand and others 4

WORLD CLASS PRODUCTION FACILITIES  8 production sites Facilities  2 farms (dairy, pineapple) STRATEGY To be the supplier of choice across our markets for fresh, frozen and long life meal solutions Strategy Strategic objectives Diversified food group  Ensure diversity across products, customers, regions and revenue streams  Operate primarily in the domestic market and high growth Sub-Saharan countries  Export long life products to international markets  Identify additional markets, channels or products with high growth potential Value add meal solutions  Offer convenience food in fresh, frozen and long life formats  Meal solutions across customer income groups  Continuous innovation in products, processes and packaging  Strategic goal to be the market leader in innovation 10 5

RHODES FOOD GROUP Annual Results Presentation 2014 STRATEGY continued Strategy Strategic objectives Market leading brands  Trusted own brands  Maintain #1 or #2 position in each target product category  Complement organic growth with value accretive acquisitions  Accelerate growth in new segments or markets through acquisitions and product launches Partnerships with  Produce for select private label programmes industry leaders  Extend existing partnerships to customers in new categories and geographies  Establish new long-term relationships with local and international customers  Continuous investment in state-of-the-art technology and World-class manufacturing facilities production processes  Facilities located close to end markets and sources of raw materials  Production sites certified to international standards 11 FINANCIAL PERFORMANCE 6

FINANCIAL HIGHLIGHTS  Turnover +31.5% to R2.4 billion  Operating profit +47.9% to R236 million  Operating margin up from 8.6% to 9.7%  Normalised* HEPS +40.5% to 36.8 cps  Normalised* diluted HEPS +40.1% to 35.3 cps * Assumes 221 million shares in issue for 2014 and 2013, and excludes one-off group restructuring costs of R22.2 million in prior period 13 INCOME STATEMENT R’m Sep 2014 Sep 2013 % change Turnover 2 444 1 859 31.5 Cost of goods sold (1 790) (1 324) 35.2 Gross profit 654 535 22.2 Gross profit margin 26.8% 28.8% Other income 16 16 (1.4) Operating costs (434) (392) 10.7 Operating profit 236 160 47.9 Net interest paid (103) (89) 15.5 Profit before tax 133 71 88.6 Tax (51) (32) 56.5 Profit after tax 82 38 116.0 Normalised HEPS 36.8c 26.2c 40.5 Normalised diluted HEPS 35.3c 25.2c 40.1 14 7

RHODES FOOD GROUP Annual Results Presentation 2014 TURNOVER GROWTH 15 SEGMENTAL TURNOVER 16 8

OPERATING PROFIT 17 OPERATING PROFIT - REGIONAL * Margin diluted by inclusion of Bull Brand 18 9

RHODES FOOD GROUP Annual Results Presentation 2014 OPERATING PROFIT - INTERNATIONAL * Includes integration costs for acquisition of Del Monte SA 19 WORKING CAPITAL R’m Sep 2014 Sep 2013 % change Net working capital 600 470 27.6 Inventory 543 458 18.6 Accounts receivable 390 301 29.4 Accounts payable (333) (289) 15.1  Increase in net working capital in line with increase in trading activities in Q4 relative to FY2013  Net working capital days improved to 98 in 2014 from 120 in 2013 20 10

CASH MANAGEMENT 21 USE OF LISTING PROCEEDS  Net primary listing proceeds of approx R550 million  Reduced debt and deleveraged balance sheet – Settled subordinated debt R257 million – Settled mezzanine loan facility R169 million  Approx R76 million finance cost saving from FY2015  Invest in capacity expansion and production efficiency 22 11

RHODES FOOD GROUP Annual Results Presentation 2014 CAPITAL EXPENDITURE  R88 million in 2014 – Expansion R50 million; replacement R38 million  R129 million planned in 2015 – Expansion R71 million; replacement R58 million  Investment programme 2014 – 2015 Upgrading Bull Brand facility R41m Increasing capacity and upgrading pie facility R11m Increasing storage and dispatch capacity at fruit R50m production facilities 23 FINANCIAL GUIDANCE AND PLANS  Interest saving from 2015 of approx 28.9 cents per share  Tax rate to reduce to approximately 30% in 2015 – Expected to normalise to SA corporate tax rate in 2016  Medium-term operating margin target of at least 10%  Maintain flexible balance sheet structure – Capacity for selective strategic acquisitions – Target debt:equity ratio of 20% to 50%  First dividend planned for FY2015, payable early 2016 – Dividend cover ratio of 3 times diluted HEPS 24 12

TRADING PERFORMANCE REGIONAL: LONG LIFE FOODS  Rhodes brand: Focus on LSM 5 – 10; over 130 SKUs – Number 1 or 2 in canned fruit, vegetable and jam  Bull Brand: Target LSM 4 – 8; over 20 SKUs – Number 1 canned meat brand  Consistent brand share gains  Significant producer of private label products in SA  Long-term relationships with retailers and distributors in Africa  Leadership in product and packaging innovation 26 13

RHODES FOOD GROUP Annual Results Presentation 2014 REGIONAL: LONG LIFE FOODS – MARKET SHARE Market shares* (%) Position 2010 2013 2014 Jams 2 29.9 35.9 38.4 Canned fruit 2 31.4 40.7 40.5 Canned vegetables 2 7.7 12.6 14.4 Canned meats 1 - 66.2 66.3 * Moving annual total. Retailer scanning data processed by Aztec South Africa (market shares in retail channel, in retail prices) 27 REGIONAL: LONG LIFE FOODS – BRAND SHARE Brand shares* (%) Position 2010 2013 2014 Jams 2 12.0 15.7 18.2 Jam in glass 1 5.7 12.5 17.4 Canned fruit 2 12.9 22.3 23.3 Canned pineapple 1 39.5 49.5 52.5 Canned vegetables 2 5.5 10.7 12.5 Canned tomato 2 8.3 20.3 20.8 Tomato paste 1 5.9 28.7 31.3 Corned meat 1 - 37.5 39.0 * Moving annual total. Retailer scanning data processed by Aztec South Africa (market shares in retail channel, in retail prices) 28 14

REGIONAL: LONG LIFE – SUB-SAHARAN AFRICA Sub-Saharan countries where Rhodes Food Group is present (population covered c.170 m) 29 REGIONAL: FRESH FOODS  Targeted mainly at higher LSM consumers in SA – Focus on convenience and quality  Long-term exclusive partnership with Woolworths – Ready meals on a national basis – product portfolio of 145 SKUs – Pies and pastries – Dairy - Ayrshire milk and cream; speciality cheeses – Benefit from Woolworths strategic focus on fresh food products 30 15

RHODES FOOD GROUP Annual Results Presentation 2014 REGIONAL: FRESH FOODS  Supply agreement with Corner Bakery (July 2014)  Extensive presence in wholesale through Magpie brand  Growing food service opportunity 31 INTERNATIONAL  Key export products are canned fruit, fruit purees and juice concentrates  One of two deciduous canners in the country  Long-term supplier to global retail brands, selected premium private label customers and wholesale  Leader in fruit cup production 32 16